L1 Health and Health Expenditure Data PDF

CAS EC 387 Introduction to Health Economics
L1 Health and Health Expenditure Data
Bjorn Persson
Boston University
Spring 2020
Bjorn Persson (Boston University) Spring 2020 1 / 18

Healthcare Market Place I
Topics
Size of the health care sector
Mortality and morbidity data
Growth in health expenditures

US Health Care Sector
Large sector - one out of every six dollars is spent on health care
(17.9% of GDP)
Almost 10% of the labor force employed in the health sector (2017)
Total spending: $3.5 trillion (2017)
Large share of personal income spent on health: $10,739/capita

(2017)
In 1960, $148/capita – a seven-fold increase in real terms

Health Spending by Type of Service
Personal health care US 2017
Service billion $
Hospital care 1100.0
Physician and clinical services 694.3
Prescription drugs 333.4
Nursing homes 166.3
Dental services 129.1
Other professional service 181.3
Home health care 97.0

Health Spending
Distribution of spending in population

Top 1% of population spends 22%
top 5% of population spends 49%
Trend stable since 1970s
Distribution of spending (2010)

Hospital 33%
Physicians 20%
Pharmaceuticals 10%
Nursing homes 5%
Dental services 4%
Source: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-
Reports/NationalHealthExpendData/downloads/highlights.pdf, S. T. Parente "Healthcare Market Place",
Coursera
Who is Paying?
Health spending by major sources of funds (2017)
Private health insurance: $1.1 trillion (34%)
Medicare: $705.9 billion (20%)
Medicaid: $581.9 billion (17%)
Out-of pocket: $365.5 billion (10%)
Health spending by type (2017)

Households: 28%
Federal government: 28%
Private Businesses: 21%
State and local government: 17%

US Health care expenditures as share of GDP
Source: Centers for Medicare and Medicaid Services:
http://www.cms.gov/NationalHealthExpendData/25_NHE_Fact_Sheet.asp
Growth in Expenditures
Trends in spending growth lower in 90s and late 00s
In‡ation (2009 - 2010)

General in‡ation 1.6%
Outpatient visit 10.1%
Inpatient admission 5.1%
Pharmaceuticals 3.0%
Outpatient procedure 2.1%
All outpace general in‡ation

Health Spending
Sources: S. T. Parente "Healthcare Market Place", Coursera, and OECD

Health Care Spending Internationally
Health care expenditures highly correlated with GDP, (income

elasticity positive)
Health sector is large in all OECD countries, around 10 – 12% of GDP
Spending varies between and within countries
Public/private …nancing
Age structure and unemployment rate has no signi…cant impact
In most developing countries, health expenditures typically constitute

smaller part of GDP
Severe measurement problems

Growth in Health Care Expenditures
Health care expenditures as share of GDP over time in some

comparable countries
Country 1990 2000 2017

Australia 6.5 7.6 9.1
Canada 8.4 8.3 10.4
France 8.0 9.5 11.5
Germany 8.0 9.8 11.3
Israel 6.5 6.8 7.4
Japan 5.8 7.2 10.7
UK 5.1 6.0 9.6
US 11.3 12.5 17.2
Source: OECD

Health Expenditures per Year and Capita 2010
Country $ % of GDP Country $ % of GDP

US 8, 233 17.6 Eritrea 17 2.9
Luxembourg 6, 712 7.9 Myanmar 26 2.0
Monaco 5, 915 4.4 DRC 26 7.5
Norway 5, 391 9.3 Pakistan 28 1.0
Switzerland 5, 297 10.9 CAR 30 3.8
Netherlands 5, 112 12.1 Madagascar 35 3.6
Denmark 4, 467 11.1 Niger 36 4.8
Canada 4, 443 11.4 Ethiopia 50 4.8
Austria 4, 398 11.0 Afghanistan 52 10.4
Germany 4, 342 11.5 Burundi 54 9.1
Source: The WHO, Health expenditure per capita (current US$),
http://en.wikipedia.org/wiki/List_of_countries_by_total_health_expenditure_(PPP)_per_capita

Increasing Health Care Spending
A fundamental equation
Consider the following simple equation:
Expenditures = Price x Quantity
Why are health expenditures so high in the US, and why are they
increasing?
Increasing demand and supply of health care services
Prices in the health sector increase
It must be one or the other, or both!

Health Indicators OECD Countries

Broad Causes of Death
Source: WHO

Causes of Death US 2010 (Source CDC)
Leading causes of deaths %

Cardiovascular disease 24.2
Malignant neoplasms 23.3
Chronic lower respiratory diseases 5.6
Cerebrovascular diseases 5.2
Accidents (unintentional injuries) 4.9
Alzheimer’s disease 3.4
Diabetes mellitus 2.8
Nephritis, nephrotic syndrome 2.0
In‡uenza and pneumonia 2.0
Suicide 1.8

Causes of Death Eritrea 2010 (Source CDC)
Leading causes of deaths %

Lower respiratory infections 10.3
Diarrheal diseases 8.4
Malaria 7.4
Tuberculosis 5.5
Protein-Energy Malnutrition 5.1
Stroke 3.2
Cardiovascular disease 3.1
HIV/AIDS 3.0
Other infectious diseases 1.5
Other maternal disorders 1.3

GDP and Causes of Death
High-income countries
more than 2/3 live past 70 and predominantly die of chronic diseases:
cardiovascular disease, chronic obstructive lung disease, cancers,
diabetes or dementia. Lung infection remains the only leading
infectious cause of death
Middle-income countries
about 1/2 live to the age of 70 and chronic diseases are the major
killers. Unlike in high-income countries, tuberculosis, HIV/AIDS and
road tra¢ c accidents also are leading causes of death
Low-income countries
less than 1/5 reach the age of 70, and more than 1/3 of deaths are
among children under 15. People predominantly die of infectious
diseases: lung infections, diarrheal diseases, HIV/AIDS, tuberculosis,
and malaria. Also, complications of pregnancy and childbirth, claiming
the lives of both infants and mothers
Source: WHO: http://www.who.int/mediacentre/factsheets/fs310/en/index2.html

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CAS EC 387 Introduction to Health Economics

L1 Health and Health Expenditure Data

Bjorn Persson (Boston University) Spring 2020 1 / 18

Mortality and morbidity data

Growth in health expenditures

Bjorn Persson (Boston University) Spring 2020 2 / 18

Total spending: $3.5 trillion (2017)

Large share of personal income spent on health: $10,739/capita

In 1960, $148/capita – a seven-fold increase in real terms

Bjorn Persson (Boston University) Spring 2020 3 / 18

Personal health care US 2017

Bjorn Persson (Boston University) Spring 2020 4 / 18

Distribution of spending in population

Distribution of spending (2010)

Reports/NationalHealthExpendData/downloads/highlights.pdf, S. T. Parente "Healthcare Market Place",

Medicare: $705.9 billion (20%)

Medicaid: $581.9 billion (17%)

Out-of pocket: $365.5 billion (10%)

Health spending by type (2017)

Federal government: 28%

Private Businesses: 21%

State and local government: 17%

Source: Centers for Medicare and Medicaid Services:

Trends in spending growth lower in 90s and late 00s

In‡ation (2009 - 2010)

Bjorn Persson (Boston University) Spring 2020 8 / 18

Sources: S. T. Parente "Healthcare Market Place", Coursera, and OECD

Health care expenditures highly correlated with GDP, (income

Health sector is large in all OECD countries, around 10 – 12% of GDP

Spending varies between and within countries

Age structure and unemployment rate has no signi…cant impact

In most developing countries, health expenditures typically constitute

Severe measurement problems

Health care expenditures as share of GDP over time in some

Country 1990 2000 2017

Bjorn Persson (Boston University) Spring 2020 11 / 18

Country $ % of GDP Country $ % of GDP

Bjorn Persson (Boston University) Spring 2020 12 / 18

Expenditures = Price x Quantity

Prices in the health sector increase

It must be one or the other, or both!

Bjorn Persson (Boston University) Spring 2020 13 / 18

Bjorn Persson (Boston University) Spring 2020 14 / 18

Bjorn Persson (Boston University) Spring 2020 15 / 18

Leading causes of deaths %

Bjorn Persson (Boston University) Spring 2020 16 / 18

Leading causes of deaths %

Bjorn Persson (Boston University) Spring 2020 17 / 18

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